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The fry company has a credit rating of B and 10 year semi annual 5% coupon...

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Finance

The fry company has a credit rating of B and 10 year semi annual5% coupon bonds. Current market yield until maturity on the bond is7%.

1) What is the expected price of the bond?

2) What happens if it drops to a B rating?

3) Why did the price change with the credit rating of Frycompany?

  

Answer & Explanation Solved by verified expert
4.0 Ratings (527 Votes)
The price of bond can be calculated by use of discounting ofcash flow method asvalue of bond or by use of PV function in excelFace    See Answer
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Transcribed Image Text

The fry company has a credit rating of B and 10 year semi annual5% coupon bonds. Current market yield until maturity on the bond is7%.1) What is the expected price of the bond?2) What happens if it drops to a B rating?3) Why did the price change with the credit rating of Frycompany?  

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